We are nearing the end of tax season, and one recent tax change could impact your business' bank account sooner than you think. In 2014, Massachusetts enacted a supplemental tax called the Employer Medical Assistance Contribution (EMAC), which is used to fund health insurance programs in the Commonwealth. In 2017, an Act Further Regulating Employer Contributions to Health Care was passed, temporarily changing the existing EMAC, creating a temporary supplemental contribution, and modifying the unemployment insurance rate schedule.
The updated contributions are effective for wages paid beginning January 1, 2018 and are time-limited, expiring at the end of calendar year 2019. This state-mandated payroll tax is due April 30th—and impacted tax-filing employers can expect to see a debit on Thursday, April 19th.
After speaking with several clients about this, I've put together 10 fast facts to help clarify how the EMAC and EMAC Supplement will impact employers:
- The EMAC Supplement applies to employers with more than five employees in Massachusetts, whose non-disabled employees obtain health insurance either from MassHealth (excluding the premium assistance program) or subsidized coverage through the Massachusetts ConnectorCare program.
- Employers with 6 or more employees who are currently subject to UHI (Unemployment Health Insurance) will be transitioned to EMAC.
- The EMAC Supplement only applies if a non-disabled employee was enrolled in MassHealth or subsidized coverage through the Massachusetts ConnectorCare program for more than eight weeks during the quarter.
- The EMAC Supplemental contribution rate is 5%, up to the annual wage cap of $15,000, or a maximum of $750 per affected employee, per year.
- The EMAC contribution rate has increased 0.34% to 0.51%, up to the annual wage cap of $15,000.
- Massachusetts employers covered by the Unemployment Insurance Law are also liable for a health insurance contribution.
- Employers are exempt when they meet the definition of "newly subject"—that is, an employer is not liable for payment of EMAC for up to three years after first becoming subject to the Unemployment Insurance Law.
- Whenever an average of fewer than 6 employees are employed during a quarter, wages paid in that quarter are exempt.
- If payments are not submitted, interest will accrue at a rate of 12% per year until fully paid, and a late-filer penalty may be assessed.
- Employer records may be periodically subjected to an audit performed by a DUA representative.
The Executive Office of Massachusetts Labor & Workforce Development has been sending out notices to employers over the past month. If you are unsure whether you will be impacted, or have any questions about the EMAC Supplement, leave a comment below or feel free to contact me directly. I'm happy to help!